- Political uncertainty at the UK, likely fresh tariffs on the EU goods and the US-Iran drama grab major market attention.
- The UK Markit Construction PMI and global political plays to offer fresh impulse.
Not only the UK Prime Minister (PM) candidate Boris Johnson’s proposal to shrink the Cabinet by half but latest risk-on sentiment also seems to play its role in dragging GBP/JPY back towards 137.00 during the early Asian session on Tuesday.
With the headline British manufacturing activity gauge slumping to the lowest since October 2019, the pair couldn’t avoid a pullback from the 20-day high.
The downturn gets extended during the early morning after The Telegraph reported that Boris Johnson is weighing a proposal from key backers to shrink the size of the UK’s Cabinet if he becomes prime minister.
Additionally, the proposal from the US Trade Representative’s office to levy fresh tariffs on the EU goods worth of $4 billion also triggered risk-on sentiment and fetch the quote southward. Furthermore, the US and Iran continue to remain at loggerheads with the US recently informing France about the Arab nation holding more low-enriched Uranium than permitted by the nuclear deal.
Even if the US-China and the US-Mexico trade optimism can keep a tab on the Japanese Yen’s (JPY) safe haven demand, worsening relation between the US and Iran, coupled with latest tariff threat on the EU goods, may continue signaling the pair’s downside. However, likely improvement in the UK Construction purchasing managers’ index (PMI) figure to 49.3 from 48.6 during June can trigger the quote’s short-covering.
Technical Analysis
While 138.50 and 137.75 are likely immediate supports ahead of June month of close to 135.37, 21-day exponential moving average (21-D EMA) level of 137.27 and latest high of 137.80 seem to limit the near-term upside of the pair.
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